New landlords often ask me what are the most common mistakes landlords make and how can they avoid it. Working in this industry for over 15 years and being a property investor myself, I’ve narrowed it down to five risks that cause aspiring landlords to fail so early into their property investment plan.
Your property investment is not your home, be sure to treat it as a business. When choosing a property to purchase, don’t just ask yourself, “Would I live here?” You must also consider other advantages and disadvantages from other viewpoints. Is it close to a school? Are there transport options nearby?
Be just as objective when making other decisions, such as renovation. When making changes, be as neutral as possible and choose decor and fixtures that would appeal to most people.
Being friendly with tenants is valuable, but always know when to draw boundaries. Your property investment is a business, not a hobby, so keep things professional between you and your tenants.
Always put discussions and agreements in writing. Did you know that Queensland legislation requires all maintenance agreements to be put in writing?
This is where you’d truly appreciate your property manager handling matters on your behalf. An effective property manager can engage tenants and see to other management issues in the most professional way.
Not staying on market trends
There’s no easier way to create a quick vacancy by introducing a sudden rental increase. But, if the market allows it and you keep your eye on the latest market rents, you should be able to increase rent bit by bit. If you have a worthwhile property manager, they should be able to provide you with a market appraisal prior to the end of each lease renewal to assess if a rental increase is warranted.
No depreciation schedule
A depreciation schedule is the schedule of items that can be depreciated at a certain rate, allowing property owners to claim tax deduction from their taxable income. This could save you thousands of dollars in taxes. This is an advantage any wise landlord would not want to ignore.
No regular maintenance
Do you look around your own home and think of the carpets you want to replace? The leaky taps that need fixing? The fence that needs repainting? Your tenants might be thinking the same thing about your property investment. Not only will regular maintenance keep your tenants happy, but updates can impact optimum rent and returns.
Are you a first-time landlord? What property investment mistakes have you managed to turn around?